The minister called it a Giffen good. This is an inferior good or staple such as potatoes, that sell more when the price rises because poor people have to switch the money they used to buy meat into potatoes to keep their calories up. But he meant a Veblen good, something like champagne with snob value, hence a high price.

The schoolboy error is forgivable, but what's problematic is that ministers, headed of course by the fearsomely overly brain-endowed David Willetts, have only now realised this is an issue.

Willetts did PPE at Oxford. The E stands for economics. Any knowledge of economics would have indicated that the Veblen effect would kick in once universities were asked to raise their fees. And any knowledge of economics would have predicted other things too.

For example, as universities began making their fees declarations, and it looked as if too many were going for £9,000, the government hinted if they didn't curb their demands, their government funding would be cut even further.

This is a classic example of what economists call a prisoners' dilemma. It would benefit universities to charge an average £7,500 to avoid cuts. But each university's best outcome depends on the decision of the others – which they can't know in advance. So each university plumps for £9,000 hoping the others will ask for less and keep cuts at bay.

So what is the answer? Clearly abandoning a failed policy that was folly from the outset is not an option. One way to go is to have no fees cap at all, but cap loans instead and capitulate to Thorstein Veblen's logic. The richest students could add to their loans and pay the highest prices for the degrees seen to have the snobbiest value – like Willetts's own PPE from Oxford.